Scrutiny likely to fall on client account interest

The possibility of the Solicitors Compensation Fund being financed by interest earned on money held by law firms in client accounts is likely to be discussed by the Law Society Council in the coming months, it emerged at the International Bar Association's biennial conference this week.

Speaking in South Africa after a session on client protection, Law Society Chief Executive Janet Paraskeva said the compliance board has asked for the issue of client accounts to go before the council.

'It is likely that a discussion about interest on client accounts will be part of that debate,' she said.

Solicitors are allowed to keep interest rather than return it to clients in certain circumstances, such as when money passes in and out of their accounts in a short period.

The possibility of using this interest for other purposes had been raised by the government.

IBA conference delegates heard that in some jurisdictions, such as South Africa, this interest is used to make the compensation fund - which recompenses clients who are victims of fraud - entirely self-financing.

The interest is also put towards indemnity insurance.

In the Australian state of Queensland, interest is mainly put towards legal aid (72% of the amount collected) and the compensation fund (13%).

In July, the Law Society council decided to increase compensation fund contributions by 150% to 500 for solicitors qualified for seven or more years.

This was to ensure that the fund has assets to cover gross claims of 31 million (see [2002] Gazette, 25 July, 3).

By Neil Rose in Durban